California Punitives by Horvitz & Levy

  • Can the Red Cross, FDIC, or Federal Credit Unions Be Sued for Punitive Damages?

    We previously blogged here about our firm’s pending cert petition in McGee v. Tucoemas Federal Credit Union. My partner Rob Wright, who is counsel of record for the credit union, explains the important issues raised by the petition:

    Congress has given most federal instrumentalities, including federal credit unions, authority to “sue and be sued.” In Tucoemas Federal Credit Union v. McGee, we have petitioned for a writ of certiorari on the issue of whether a federal credit union’s authority to sue and be sued includes being sued for punitive damages. The appellate court in this case was confronted with two lines of seemingly conflicting authority. One line includes decisions by the Sixth, Eighth, Ninth, and Eleventh Circuits of the United States Court of Appeals holding that a federal instrumentality’s authority to sue and be sued does not include being sued for punitive damages. Typical of these decisions is Matter of Sparkman, 703 F.2d 1097 (9th Cir. 1983), which relied on “the long-established principle that the United States, its agencies, and instrumentalities cannot be held liable for punitive damages unless there is express statutory authorization for such liability.” Id. at 1100. As a result, the Ninth Circuit held that while the “sue and be sued” clause in the enabling legislation for the federal instrumentality at issue in that case (a production credit association) “waives sovereign immunity from ordinary lawsuits, it does not subject production credit associations to liability for punitive damages. Such immunity must be waived expressly.” Id.

    The other line of authority consists of decisions by the United States Supreme Court holding that “sue and be sued” clauses are construed liberally. Typical of these decisions is FDIC v. Meyer, 510 U.S. 471 (1994), which holds that courts “‘liberally construe the sue-and-be-sued clause’” and will presume that a federal instrumentality’s liability “‘is the same as that of any other business.’” Id. at 481 (original emphasis). However, none of the decisions in this second line of authority address punitive damage claims.

    In this case, the California Court of Appeal held that the line of United States Supreme Court decisions liberally construing the sue and be sued clause impliedly overrule the line of Court of Appeals decisions construing the clause to exclude punitive damage claims. As a result, the California Court of Appeal affirmed the punitive damages award against the federal credit union.

    Because the issue here could affect not just federal credit unions but other federal instrumentalities with sue and be sued clauses as diverse as the American Red Cross and the Federal Deposit Insurance Corporation, this petition may be worth watching.

  • Cornell Previews Exxon Valdez Oral Argument

    Cornell University’s Legal Information Institute has prepared this excellent summary and preview of the Exxon Valdez case scheduled to be argued in the U.S. Supreme Court on February 27, 2008. The preview concludes with this assessment: “The first question for the Court is when a shipowner can be held liable for punitive damages for a ship master’s tort. In answering this, the Court will resolve disagreement among the circuits. However, the question has a case-specific complication: Exxon’s possible independent liability. The second question—whether CWA displaces punitive damages under maritime law—may have little significance beyond this case. The Oil Pollution Act of 1990, not the CWA, is now the controlling statute in oil spill cases. Nevertheless, resolving the second question in Exxon’s favor may enable the court to avoid sending the case back for further factfinding if Exxon’s independent liability proves pivotal to judgment on Question 1.”

  • U.S. Supreme Court Expands Oral Argument Time in Exxon Valdez Punitive Damages Case

    The Supreme Court issued an order today expanding the time allowed for oral argument in the Exxon Valdez case. Instead of the usual 30 minutes per side, the court has alloted 45 minutes per side for oral argument. The Court rejected the state of Alaska’s request to participate in oral argument.

    Hat tip to SCOTUSblog.

  • Exxon Valdez Plaintiffs Hope DVD Will Influence Supreme Court to Affirm $2.5 Billion Punitive Damages Award

    Marcia Coyle of the National Law Journal has an interesting article about a DVD filed in the Supreme Court by the plaintiffs in the Exxon Valdez case. The DVD contains audio of Captain Hazelwood’s distress call to the Coast Guard and video of the environmental impact of the spill. The plaintiffs submitted the DVD without objection from Exxon Mobil.

    The article mentions that the plaintiffs sought permission to file an electronic brief in the Supreme Court and the clerk’s office agreed to circulate the e-brief to the court, but the plaintiffs “decided not to push it.” I’m not sure why the plaintiffs thought an e-brief would be “pushing it.” Our firm regularly files e-briefs, and although we have never filed one in the U.S. Supreme Court, we have heard consistently from judges and court staff in other courts that they find e-briefs very useful and they would like to receive them more often. We have never had any court reject a request to file an ebrief.

  • Flow Chart Illustrates History of Exxon Valdez Punitive Damages Award

    For those of you who haven’t followed all the twists and turns of the litigation over the multi-billion dollar punitive damages award in the Exxon Valdez litigation, you can catch up using this flow chart.

  • The Potential Impact of the United States Supreme Court’s Exxon Valdez Punitive Damages Opinion

    The Daily Journal has an article (subscription required) previewing the February 27 oral argument in the Exxon Valdez case. The article begins: “When the Exxon Valdez oil tanker ran aground off the coast of Alaska in March 1989, the Berlin Wall had not fallen, NBC was making plans for a new sitcom called ‘Seinfeld,’ and John Roberts was a 34-year-old climber looking to make a name for himself as an appellate lawyer. Nineteen years later, Eastern Europe’s transformation and Seinfeld’s celebrated run are a part of history, but the Valdez dispute remains, as the Roberts-led Supreme Court is preparing to decide how much, if any, punitive damages Exxon owes for spilling 11 million gallons of oil into the Prince William Sound. The case, with arguments scheduled for Feb. 27, comes to the high court after three trips to the San Francisco-based 9th U.S. Circuit Court of Appeals, which settled on a $2.5 billion punitive-damages award to fishermen and other Alaskans who suffered economic harm from the massive environmental disaster. Though the figure was half the amount awarded by an Alaska jury, it was by far the largest punitive-damages award affirmed by a federal appellate court. Exxon protested that the award should be significantly lower, if not eliminated.”

    The article makes the point that if the court sets forth a common law limitation on punitive damages, the case could have widespread impact, but if it simply applies maritime law, it is not likely to have much impact. The article also points out that the three primary dissenters in due process punitive damages cases (Justices Scalia, Thomas, and Ginsberg) may well be in play for Exxon in this case because the analysis under maritime law is different from the analysis under due process.

    We previously blogged about the potential impact of the Exxon Valdez opinion here. And see here for a post about professor Erwin Chemerinsky’s article on the same subject.

    UPDATE (by Lisa Perrochet on 2/13/08 at 9:55 a.m.): Cal Law has a similar story today [subs. req’d] regarding the imminent Exxon Valdez argument. Reporter Tony Mauro notes that Justice Alito has recused himself from the proceedings, opening the door for a 4-4 split. Mauro further observes, “Exxon supporters are hoping to win over Justices Antonin Scalia and Clarence Thomas, who have never found in their copies of the Constitution a bar against punitive damages. However, under maritime law — a form of judge-made common law — the two justices might join others who have voted to limit punitive damages in recent years.” Mauro also quotes Mayer Brown’s Andy Frey: “‘The shackles are off’ Scalia and Thomas” and, says Frey, even though the ruling may stress maritime law, it may also be “‘very important for the issue of punitive damages generally.’”

    FURTHER UPDATE (by Jeremy Rosen on 2/13/08 at 1:21 pm): Some of the 32,000 class members in the case have created their own “whole truth” website. According to the BLT (the Blog of Legal Times), the class members started the website to “highlight the continuing impact on the lives and work of Native Alaskans and others in the Prince William Sound. The group also plans a candlelight vigil in D.C. around the time of the arguments.”

  • “Punitive Damages are Needed to Keep Big Oil Accountable”

    In an op-ed in the Anchorage Daily News (subscription required) John Devens of the citizens’ councils for Prince William Sound and Cook Inlet explains why those groups filed an amicus brief in support of the plaintiffs in the Exxon Valdez case. Devens argues that Exxon Mobil relies on outdated maritime law principles that no longer reflect today’s realities, and he argues that punitive damages must be available in maritime law cases to deter irresponsible corporate behavior. Devens faults Exxon most for its underfunding of Alyeska Pipeline: “Alyeska Pipeline, tasked with initial cleanup efforts after a spill, was utterly unprepared for what it faced on March 24, 1989. Exxon was (and is) one of the owners of Alyeska. It helped determine Alyeska’s budget, how much equipment Alyeska had on hand, and how Alyeska’s people were trained to clean up oil. Alyeska’s unpreparedness and the inadequate response that resulted were due in large measure to deliberate actions by Exxon itself.”

  • 2008 Election, the Supreme Court and Punitive Damages

    One of the issues that the major presidential candidates will argue about in the general election is what type of judges should be appointed to the federal courts, especially to the Supreme Court. Many observers predict that the next president will have at least two or three nominees to the United States Supreme Court. Recently, Senator McCain, as part of his outreach to conservatives, issued a statement on judicial nominees: “I believe that one of the greatest threats to our liberty and the Constitutional framework that safeguards our freedoms are willful judges who usurp the role of the people and their representatives and legislate from the bench. As President, I will nominate judges who understand that their role is to faithfully apply the law as written, not impose their opinions through judicial fiat. . . . When applying the law, the role of the judge is not to impose their own view as to the best policy choices for society but to faithfully and accurately determine the policy choices already made by the people and embodied in the law. The judicial role is necessarily limited and one that requires restraint and humility.”

    Senator Clinton and Senator Obama have argued for a more expanded role for federal courts in general, and the United States Supreme Court in particular, especially in the area of ensuring due process in a wide range of cases.

    The United States Supreme Court’s jurisprudence on the constitutional limits on state court punitive damage awards has created some interesting coalitions. In BMW v. Gore and Campbell v. State Farm, the majority who found that the due process clause imposed a significant limitation on state jury awards of punitive damages included Justices Stevens, Souter, Breyer, Kennedy, O’Connor and Chief Justice Rehnquist. The dissenting justices Scalia, Thomas and Ginsberg argued that the Due Process Clause did not provide such a substantive limitation on punitive damages. In the more recent Philip Morris v. Williams case, Chief Justice Roberts and Justice Alito joined the majority in reversing a state-court punitive damages award on the basis that the lack of a jury instruction violated due process. Justice Stevens joined the earlier dissenters (Scalia, Thomas and Ginsberg) while Souter, Breyer and Kennedy remained in the majority.

    Thus, will a President McCain, who says he wants to appoint justices who will show judicial restraint, appoint justices like Scalia and Thomas who find no federal due process right implicated by state-court punitive damage awards, or will he appoint justices like Roberts, Alito, and Rehnquist who do? Conversely, will a President Clinton or President Obama appoint justices who have an active view of due process in punitive damage cases like Justices Breyer, Souter, and Stevens or one with a view like Justice Ginsberg? The analysis of constitutional limits on punitive damages does not fit into the usual 5-4 box into which many controversial cases seem to fit.

    This is a question that deserves to be contemplated over the next many months as the future of the Supreme Court is debated.

  • Philip Morris v. Accord: Cert Petition on Punitive Damages Issue Will Be Considered on February 15

    The Supreme Court will consider the petition for certiorari in Philip Morris USA, Inc. v. Accord at next week’s conference. The issue presented is whether, under the Due Process Clause, defendants’ liability for punitive damages in a mass tort trial may be adjudicated prior to a finding of compensatory liability.

    The cert. petition is available on SCOTUSblog here, along with the brief in opposition, the petitioner’s reply, and amicus briefs by the U.S. Chamber of Commerce and Ciba corporation.
    SCOTUSblog flags this petition as one of several that have a reasonable chance of being granted.

    This is a recurring issue in California mass tort litigation. In addition to the due process issues raised in this cert petition, California law adds a further wrinkle: Civil Code section 3295 requires that punitive damages issues be tried “by the same trier of fact that found for the plaintiff,” which seems to preclude trial of punitive damages before liability issues.

  • ABA Journal Article on Exxon Valdez Case: “At Sea Over Punitives: Justices Sail into Murky Waters over Damages from Infamous Disaster”

    The February 2008 edition of the ABA Journal has this article on the Exxon Valdez case pending before the U.S. Supreme Court. The article focuses on the maritime law aspects of the case, but quotes Robin Conrad of the U.S. Chamber of Commerce for the proposition that the case presents an issue of fairness that transcends maritime law: “While the Due Process Clause is not an issue before the court per se, the question of fundamental fairness is front and center.”